What is a High Deductible Health Plan

Rebecca Fox: When it comes to the money in your wallet a High Deductible Health Plan or HDHP may sound like a draining insurance option. After all HDHPs require you to meet higher deductibles than traditional health plans like PPOs. Mark Prudowsky: First off all, I agree with them, that it is scary. Rebecca Fox: But wait, Mark Prudowsky isn't done yet. As someone who works with HDHPs day in and day out, he says deductible numbers don't show the whole picture. First off, HDHPs are often combined with the health saving accounts or HSA. Depending on your plan you may or may not pay a premium. In many cases your employer is saving money by offering you an HDHP and a portion of that savings called the premium pass-through is deposited into your HSA account. You can also make voluntary contributions to your account, provided the contributions don't go over limits set by law. Mark Prudowsky: As you put that in your HSA, all the moneys are tax deferred. In other words, it lowers your taxable income. So as you put more money in your HSA you're actually decreasing your tax liability. Rebecca Fox: You can use the money in your HSA to pay for a whole host of qualifying medical expenses or qualifying care to meet your plan deductible. Depending on the HDHP you have, you maybe able to choose in network or out of network providers, like other plans using in network providers will save your money. Then once you meet your deductible, you're often covered 100%. It's a percentage HDHP user Jerry Lepore finds particularly appealing. Jerry Lepore: That's pretty comfortable feeling, you have a catastrophic situation where you need surgery, or need special care that at least your out-of-pocket-cost for the year is limited to what your deductible is. Rebecca Fox: Keep in mind, preventative care is often covered in full, though a smaller deductible or co-payment maybe required. Mark Prudowsky: For instance, the health plan may offer free mammogram, or mammograms with a co-pay. Those co-pay dollars can be used tax free with HSA dollars. Rebecca Fox: Or there is another option, you can pay your healthcare expenses out of pocket and let the savings in your HSA continue to grow, because they are rolled over from year-to-year. That's a feature that Lepore and a growing number of Americans take advantage of. Jerry Lepore: I feel much more comfortable that in my later years of life, I'll be able to subsidize the care I need, with the dollars that I have saved and I have allowed to grow since I've joined the HSA. Rebecca Fox: But the Vice president from Managed Care and Physician Services at one hospital says, since offering HDHPs, the majority of their employees still aren't setting aside enough of their premium saving and that's a risk she sees when it comes to paying a bill. Ellen Jackson: So in the event that they have a catastrophic case, or just even a regular outpatient surgery and inpatient admission, the likelihood of them being able to fully compensate the healthcare provider for the services, is questionable. So that's a big concern for the healthcare community. Rebecca Fox: Jackson says, another concern is patients may sacrifice quality when it comes saving their healthcare dollars. Ellen Jackson: We have situations when some of our members have gone and purchased the least expensive MRI, they get to the surgeon's office and the surgeon, the quality of the MRI is so poor that it has to be redone at another facilities. Now, the person is paying for two MRIs and so there is a danger in choosing cost over quality. Rebecca Fox: Those issues aside advocates say High Deductible Health Plans and HSAs can be used as an effective vehicle to save money and pay for healthcare cost. For example, if Lepore should retire, change health plans or move on to another company, he still keeps the money in this account. Mark Prudowsky: The Health Savings accounts, they are owned by the individual, even if an employer deposits money as an initial stimulus towards savings, once it's in that account the employee owns that money. If they leave their employer, they take that money with them. Rebecca Fox: But Prudowsky cautions High Deductible Health Plans aren't for everyone. Mark Prudowsky: High Deductible Health Plans require an individual to assume responsibility, understand their insurance plan and be a wise saver and spender. Some people wish not to do that, and in that scenario another type of health insurance product maybe better turning towards. Rebecca Fox: Like Lepore, ultimately it's a decision you will have to make when weighing your own healthcare cost and family situation. For icyou.com, I am Rebecca Fox.